By Terry Xu
In the Worker’s Party’s press statement on the Aljunied-Hougang-Punggol-East Town Council (AHPETC) 2012/2013 annual report, it emphasized that the independent auditors gave the town council a “qualified report” and not an “adverse report.” Apart from the 13 specific observations, the town council’s books, accounts and records have been kept in accordance with the Town Councils Act.
The full audited report can be viewed here.
With regards to the 13 points highlighted by the auditors, the AHPETC explained that since Financial Year 2011, the auditors had tried to request information from the former Managing Agent of the town council when it was under the charge of the People’s Action Party (PAP).However, such requests were unsuccessful.
“Repeated attempts by the Town Council (TC) to obtain information from the former Managing Agent (MA) and government authorities, such as asking MND / the Housing and Development Board regarding $1.12 million which the PAP-run Aljunied TC had recorded as receivables from the Citizens Consultative Committees (CCCs) for Town Improvement Projects, did not yield answers. Further attempts in FY 2012 to get the information were also unsuccessful.”
The Workers’ Party said that unless those agencies with the required information furnished them to the town council, it is likely that information gaps will remain and the accounts will continue to be qualified every year. The party said that the Ministry of National Development (MND) would be the best party to assist the town council to resolve some of the key information gaps.
The party acknowledges the oversight of transferring monies to the Sinking Fund and said it has since rectified the oversight. It added that the oversight did not result in any loss of monies or unauthorized spending.
MND released a press statement on Friday evening and said that there were nine new issues of concern which were raised by the auditor for the Financial Year 2012. The ministry said that such failures are not related to handover issues.
However, in the financial report of AHTC 2011/12, the auditors wrote in the auditor’s basis of disclaimer:
“The accompanying financial statements include the Income and Expenditure statement, sinking funds, town improvement and project fund and government grants whose figures include those stated in the statement of income and expenditure and receipts and payments for the period 1 April 2011 to 31 July 2011 of Aljunied Town Council.”
“This statement was audited by another firm of auditors and we were not allowed access to the auditor’s audit documentation. We were also not able to obtain the supporting accounting documents from the previous managing agent of the Aljunied Town Council prior to the reconstitution. As a result, we were unable to determine whether the income and expenses and receipts and payments for the period 1 April 2011 to 31 July 2011 for Aljunied Town Council that are included in the accompanying financial statements are fairly stated.”
For clarity, points 3, 4, 5, 7, 8, 9, 11, 12 and 13 is as follow
- 3. Conservancy and Service receivables
- 4. Lift repair expenses
- 5. Lift Upgrading Program (LUP)
- 7. Conservancy and service fees received in advance
- 8. Income Taxes
- 9. Goods and Service Taxes (GST)
- 11. Transfer to Sinking Funds
- 12. Related Party transaction
- 13. Subsequent events review
Therefore, apart from points 11,12,13, the “new” points of observation that MND was pointing at were already highlighted in the above disclaimer of the prior year’s financial report. And that this coincides with what the Workers’ Party has mentioned in its press statement.
While the Workers’ Party has yet explain points 12 and 13, the MND would have to give an explanation on why the previous town council has not shared its audited documents with the current town council to reconcile the accounts.
In fact, it is more troubling to know that the outgoing town council management can withhold crucial financial documents from the incoming management. Would that not be holding the residents ransom?
And what should one think of the People’s Action Party (PAP) which is making a mountain out of a mole hill from problems created by its own party to begin with?
We attach below a summary of the 13 points observation brought up by the auditors in the financial report of AHPETC.
1) Opening Balances
Auditor wrote that they were unable to obtain sufficient, appropriate audit evidence to provide a basis for an audit opinion on the financial statements of Aljunied Hougang Town Council for the financial year ended 31 March 2012 and they were also unable to deter if the opening balances of the Town Council and comparatives in the current year’s financial statements were derived from the financial statements for financial year ended 31 March 2013 are fairly stated.
2) Receivables from various stakeholders.
Citizens Consultative Committee
a) The auditors note that in the current financial year, the Town Council received $520,926 from the Citizens Consultative Committee. But the receipts for this sum cannot be identified and matched to the receivable balance of $1,118,574. The Town council had recorded this amount received of $520,926 in other payables as at 31 March 2013 which the auditors are unable to determine if this was appropriate.
b) Inland Revenue Authority of Singapore (“IRAS”)
Auditor note that the Management of the Town Council does not have any supporting documents to substantiate the receivables due from IRAS amounting, $110,735 in the accounts that was handed over by the previous managing agent.
c) Sundry Debtors
Auditors were unable to carry out audit procedures for the balance of $1,831,094 recorded in the Sundry Debtors.
TOC’s note – Note that the amount was brought over from year 2011 (view note)
3) Conservancy and Service receivables
Auditors unable to ascertain the credit risk characteristics of the conservancy and service receivable as Management unable to provide an aging analysis or information on the credit profile of individual units.
Town council provide for impairment losses for outstanding conservancy and service receivables when the receivables are more than seven years in arrears.
4) Lift repair expenses
Auditors unable to determine accuracy of lift repair expenses of $1,630,298 recorded in the year under audit as Management did not ascertain the quantum of 2012’s expenses that was included in 2013’s financial statements.
5) Lift Upgrading Program (LUP)
Expenses relating to the previous financial year were included in the LUP expense of $18,612,857, under the sinking funds expenditure, caused the current year’s LUP expenditure to be overstated.
As the management did not ascertain the quantum of prior year’s expenses that was included in the current year’s financial statements, the auditors were unable to determine accuracy of the expenses recorded in the year of audit
6) Creditors and Accrued Expenses
a) No Standard Operating Procedures to enable timely recording of liabilities therefore auditors are unable to ascertain the completeness of the liabilities.
b) Auditors unable to ascertain validity of an amount of $338,379 pertaining to “Accrual without work orders” brought forward from Aljunied Town Council in August 2011 as the Town Council was unable to provide details of the amount.
c) Auditors unable to ascertain payables amounting to $307,715 in temporary unidentified receipts from residents and Housing and Development Board as Town council was unable to provide details of the amount.
7)Conservancy and service fees received in advance
Auditors unable to determine the validity and accuracy of the advance receipts from residents in respect of conservancy and service charges amounting to $507,809.
8) Income Taxes
Auditor unable to determine the validity and accuracy of tax provisions amounting $756,383 as there were no provision for tax payable by Hougang Town Council during the time of handover of operations on 26th May 2011 and there is a difference between the income paid by the Aljunied Town Council and provision for tax recorded in 2011 and 2012.
9) Goods and Service Taxes (GST)
Auditors unable to determine the validity and accuracy of GST payable of $518,707 due to unexplained differences between the GST balances recorded in the Town Council’s accounting records and GST returns submitted to comptroller of GST.
10) Cash and Bank Balances
$63,458 out of $67,589 unexplained difference noted during the March 2012 bank reconciliation remained un-reconciled. The balance has been included in other payables.
11) Transfer to Sinking Funds
Town council did not comply with Town council financial rules by not transferring any amounts of conservancy and service charges to the bank account of the sinking funds during the current financial year.
12) Related Party transaction
Auditors unable to determine the completeness of related party disclosures as the town council had not made details of the project management services fees paid to a related party available to them.
13) Subsequent events review
As the Town Council had not made its latest management accounts and records of minutes subsequent to the financial year end to the auditors. They were unable to carry out the audit procedures to obtain sufficient appropriate audit evidence as to whether events occurring between date of financial statements and date of the auditor reports that require adjustment are properly reflected in the current set of financial statements in accordance to the Singapore financial reporting standards.